Good day and thank you for standing by. Welcome to Minin's Second Quarter 2021 Earnings Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.
I'd now like to hand the conference over to your speaker today, Mr. James Cavanaro from Hayden, RR. Thank you. Please go ahead.
Thank you. And once again, welcome to Minim's 2nd quarter 2021 Earnings Call. With me on the call are Gray Charnelich, Chief Executive Officer and Sean Daugherty, Chief Financial Officer. As a reminder, all materials including today's live presentation are available on the company's Investor Relations website at ir.nanum.com. Before we begin, I'd like to remind everyone that today's conference call may contain forward looking statements.
Forward looking statements include statements regarding the future, including expected revenue, operating margins, expenses and future business outlook. Actual results or trends could differ materially from those contemplated by these forward looking statements. For a discussion of such risks and uncertainties, which could cause actual results to differ from those expressed or implied in the forward looking statements, please see Risk Factors detailed in the company's annual report on Form 10 ks contained in subsequent filed reports on Form 10 Q as well as in other reports that the company files from time to time with the Securities and Exchange Commission. Please note too that today's call may include the use of non GAAP numbers that management utilizes to analyze the company's performance. A reconciliation of such non GAAP numbers to the most comparable GAAP measures is available in our most recent press release as well as in our periodic filings with the SEC.
Now, I would like to turn the call over to Greg Chynewick, CEO of Minim. Greg, please proceed. Thanks, James. Good morning, and welcome to Minim's Q2 2021 conference call. If you're following along with the deck available on ir.
Minim.com, we're getting started on Slide 3. In the Q2 of 2021, the company grew top line revenue by 45%. This represented a 73% acceleration of growth from Q1 of 2021 when we grew at a 26% pace. I'm especially pleased with this result, given that the results of some of our key competitors have shown single digit growth or significant declines in our product segment for the same period. I'm excited to share with you today how we're doing it and where we're headed.
Please turn to Slide 4. It all begins with our vision. We believe the simple, single purpose router must go the way of the mobile phone. They must transform into an intelligent device capable of making everyone's connected home safe and supportive for life and work. At minimum, that's what we deliver.
We sell intelligent networking products into the globally recognized Motorola brand and minimum trademarked in leading U. S. Retailers, over 140 ISP service providers and now to SMBs. We operate in a massive and expanding market for high performance Wi Fi I'd like to serve the 1,000,000,000 homes that are connected to the Internet today and the 1,000,000,000 homes that have yet to come online. We have exciting technology inflection points ahead of us, including the adoption of 5 gs, fiber to the home, mesh networking, Wi Fi 6, Wi Fi 6E, DOCSIS 2.1, DOCSIS 4.0 and smartphone devices.
These advancements are accelerating network product replacement cycles and increasing consumer spending on the latest offerings. On Slide 5, you'll see today I'm joined by Minim's CFO, Sean Daugherty, we'll be speaking later on in the call and President and CMO, Nicole Tsang, who will be available for questions at the end of this discussion today. Turning to our financials on Slide 6. Our Q2 again demonstrates the momentum we're building in the market and the progress we're making towards growing software revenue bookings and achieving positive EBITDA profitability this year. We accelerated our year over year revenue growth to 45%, up from 26% in the Q1 of 2021, despite this typical 2nd quarter seasonal slowdown and drove our gross margin to more than 30%, representing a significant improvement year over year.
Our subscription business gained additional traction as evidenced by the increase in deferred revenue on the balance sheet, which is driven by expanding sales of our intelligent Software enabled hardware products. Our ratio of deferred revenue to recognized revenue for the 2nd quarter was 7%, up from just 2% in the Q1. Over time, we expect this ratio to continue to climb as our sales increase And the mix shifts towards more software driven intelligent networking products. On the expense side, most notably, we incurred a $500,000 one time material scrap expense that marked the completion of a warehouse organization and optimization project. We also met higher component costs and increased spend on airfreight to meet the Amazon Prime Day demand, which Sean will cover later on we will be conducting a question and answer session when he looks at the financials.
Without normalizing for the impact of this one time $500,000 charge, our Q2 2021 adjusted EBITDA was negative $300,000 versus a positive $300,000 EBITDA reported in Q1. Notably, cash flow from operations was an area of marked improvement on a quarter over quarter basis. Q2 saw a net negative cash flow of $400,000 whereas Q1 saw net negative of $5,000,000 Subsequent to the end of the quarter, we raised $22,700,000 in net proceeds the secondary public offering of our common stock. Completion of this offering provides us with the opportunity to invest in inventory to sales optimization, optimization, global market expansion and new product development and marketing. Also after the end of the quarter, having completed the rebranding of the company to MNIM in June, we executed a disposition of the Zoom related trademark assets.
The combination of the proceeds from this sale and the secondary offering, A net impact of almost $27,000,000 has strengthened and significantly improved the balance sheet of the company and places us in an incredibly strong position From an operational perspective on Slide 7, I'd like to share the following highlights. In Corporate Development, we formally changed our name to Minna Make, uplifted to the NASDAQ and elevated Nicole Seng to President. In Sales and Marketing, we saw tremendous momentum and performance in e commerce and retail and have expanded our sales channel in the U. S. And to India.
In product and innovation, we were awarded a new patent that protects our differentiated innovation and mesh networking and made strides in the cloud platform we have at scale. On supply chain, we navigated chips at supply challenges and price challenges with a 5 pronged strategy. The Minim brand was designed both for business and consumer appeal, and it represents AI driven software that creates Harmony in the smart home and office. Musicians of the call may recognize minim as the term represents in one half note. Looking forward, our minimum identity now carries reduced risk of investor confusion and provides a solid foundation for building enterprise value.
While saying corporate matters, I'll note with great excitement and pleasure that we elevated Nicole to the role of President and CMO. As President and CMO, Nicole has taken on a broader leadership role in company management while retaining her existing responsibilities in the company's marketing operations. Nicole's deep technology background, she holds 2 bachelor's degrees from Carnegie Mellon in Engineering, combined with her amazing track record as a 3 time CMO and experience as a co founder of Minim, the previous merger organization, make her a simply amazing partner for me as we look to drive growth and enterprise value. Turning to our sales and marketing highlights on Slide 9. This quarter saw an incredible Prime Day sales performance in June.
More specifically, this year, we sold more than the past 4 years of Prime Day events combined, with DOCSIS 3.1 modem router category leading our path to success. Our marketing department accomplished this through collaborations with operations to optimize inventory, combined with effective advertising strategies on Amazon Seller Central Platform. The sales volume was almost matched by our June product sales in Best Buy, where we took the number one spot in water matter orders to run competing Amazon Prime Day promotions. In addition to great sales numbers for Q2, given the typical seasonality, we added new retailer partners, including the Home Shopping Network, the Home Depot, Lowe's Sam's Club and BJ's Wholesale Club. Beyond the financial and market share impact of our Amazon sales, I'm also excited about the results for two reasons.
First, they reflect our strategic advantage in pairing Amazon Seller Central platform with exceptional marketing performance And talent. By leveraging Seller Central, where we directly sell to consumers, simply using Amazon as a platform, we can control pricing, marketing and the resulting net profitability better than consumers than competitors who are using the buyer central model.
And it's a
great time to begin with this. Industry analyst Park Associates just reported that for the first time, online retailers are dominating channels for smart home device sales. 2nd, our Amazon results bode well for our new market expansion goals as we can combine the global power of the Motorola brand with Amazon's massive global footprint in consumer markets and last mile logistics.
To that end, we began selling in India for
the first time this July, a new market entry executed in a matter of months. Consumers in India can now find the Motorola MH720 mesh system powered by the Minimap on Amazon. In and Flipkart. In, which we intend to formally launch with local influencers this fall. Our speed to market is a great testament to both our e commerce execution and the outsized benefits we retain by being a Motorola licensed partner.
Our products and marketing are amplified by Motorola's brand expertise, existing distribution channels, market intelligence, security testing, public relations and more. We are excited to continue to leverage these resources and our continued effort to grow into new markets and scale under that amazingly recognized brand. In our business to business sales channels, I'd like to highlight a customer announcement from the quarter. South African Internet service provider, VOX, has selected Minim to be its cloud software platform, which will underpin its next generation VOX WiFi home manager offering for fiber to the home subscribers. Leveraging Minim's software with 3rd party Microchip routers, Box has chosen Minim to deliver top notch customer service, improve customer retention and reduce support costs.
VOXX subscribers will benefit from our intuitive mobile app offering device management, threat protection, parental controls and more. The VOX network targets 400,000 fiber to the home subscribers, aiming to be one of the region's largest broadband service providers in the next few years. On the product side, on Slide 10, we're happy to report our top 3 earning products in the Q2 were our highest ASP products in each category, we are looking to our year over year margin expansion. These products were the Motorola MG8702 DOCSIS 3.1 modem router combo with our mobile app, Which made up for 13% of sales in Q2, a 14% increase over the strong launch it had in Q1 and it led in its category on Amazon Prime Day by units sold. The Motorola MD-eight thousand six hundred and eleven DOCSIS 3.1 modem, which targets consumers with gigabit speed plans, which made up for 26% of sales in Q2, a 104% increase over Q1 and the Motorola MH-seven thousand and twenty Tri Band Mesh System with our mobile app, Which made up 11% of sales in Q2, an 8 81% increase over Q1.
Also in the 2nd quarter, Minim was a quarter patent for our standard software driven approach to mesh network setup. It's easy, reliable and is standard across several hardware brands and models. Minim's patented approach allows a guided Wi Fi system setup solely using the device's Wi Fi network instead of a one time use Bluetooth radio or error prone manual buttons. This innovation offers a competitive advantage in product component statements, better user experience and improves the integratability of our software with a variety of hardware platforms. Behind the scenes, we've also been part of work on successfully and efficiently scaling our cloud platform for resiliency and improved quality of service in new geographies.
With the addition of a European data center that is now available for production use, we can better serve customers in Europe, Africa and now India. The Motosync app will drop this fall alongside our high speed Wi Fi 6 product family. We've already seen great interest in these products from across our retailer footprint with special interest from those that are looking for an alternative to fund the house brand of 1 of their competitors. Turning to Slide 11 to focus on supply change management. Disruptions continue to create challenges across several industries around the world, including ours.
To date, the team has navigated these rough waters, we believe chipset strains and challenges will persist through at least the Q2 of next year. And we've been actively working to mitigate these risks. Now I'd like to share with you our 5 pronged mitigation strategy, which we've been following to great success. 1st, we extended component order forecast to 52 weeks. 2nd, we have started building relationships and negotiating directly with chipset vendors.
3rd, we're sourcing and purchasing our own supply chain from brokers and other channels. 4th, we align our marketing operations closely to manage product inventory and optimize for sales. 5th, we source chip substitutes and have reengineered products to take advantage of the availability of alternative components. As a result of this approach, while chipset availability remains an issue that we are paying incredibly close attention to,
we
are very pleased both that our efforts to date have resulted in minimal operational impacts and that our forecasts do not currently suggest future disruptions in product availability. Before I ask Sean to speak to our financial results, I'd like to take a look at what's ahead on Slide 12. The back to school season has started The holiday season is right around the corner. In the second half of the year, businesses will contemplate their performance with remote networking and revisit their real estate and IP budgets. As we expect organizations and families to continue to face the realities of the pandemic's effects on their locations, we know that they're going to be using their home networks even more intensely to live, earn and learn.
With this backdrop, we plan to launch our premium products for highly connected homes. This family includes an expandable Wi Fi 6 mesh system and 2 powerful Wi Fi 6 DOCSIS 3.1 modem routers, one of which will be the first to achieve the low latency DOCSIS certification by CableLabs. Each of these products has an attractive new design and a new app, MOTOsync powered by minimum, often differentiated network security, automated performance improvements, parental controls, privacy protection and more. These products have been designed for gamers, streamers, students, remote workers at excellent performance and value, earning them anticipated wide product placement in our retail and e commerce channels. As we widen our product portfolio and placement, we will invest in the marketing to support successful product launches in business and direct to consumer channels in the U.
S. And now India. For ISP customers, we look forward to launching a network speed performance test suite this year to benchmark their broadband speed delivery to subscribers on their network. These test results will be used to meet government requirements such as the Connect America Fund compliance as well as in their product marketing materials. We're always looking for new and innovative ways to help ISPs Acquire subscribers, lower their operational costs and deliver superior service and customization.
Looking ahead this year on other fronts, we'll continue to mitigate corporate risks, including supply chain challenges, which I've already discussed, and remain focused on the competition for the best talent. We have seen evidence of an increasingly competitive market for human resources in the technology sector with the move to work from anywhere models. Our shift to remote first approach has given us an advantage in this area that has strengthened our ability to recruit and retain top talent, which is especially important as we're anticipating adding 1 to 2 senior level positions over the next few quarters. Lastly, I'll land on our continued focus to drive top line growth and the operational efficiency necessary to achieve EBITDA profitability during the year. I will now turn it over to Sean for an even more detailed discussion of the financial results.
Thank you, Greg. I'd like to direct you to Slide 13 for a look at our financial overview. Our growth continued to accelerate in the 2nd quarter with 45% year over year increase to $14,900,000 of revenue. This marks a material increase in our year over year growth rate, up from the 26% recorded in the Q1. It is important to also note that the second quarter is one Historically impacted by retail sales seasonality.
This year, we were able to largely combat that with effective sales and marketing efforts and inventory optimization. Our efforts led to Q2 revenues that were on par with Q1, resulting in only a 1% reduction on a sequential quarter basis versus the 14% decrease experienced in 2020. This growth was driven by exceptional results on Amazon Prime Day And continued uptick in sales of our highest eXp products, as Gray mentioned earlier. Importantly, our average sales price continues to increase on increasing volumes, rising from under $95 in the year ago quarter to over $103 in the quarter just closed, representing a 9% year over year increase. We continue to target a 10% to 20% lift to our average selling prices for intelligent networking products compared to those products that are not managed by our Wi Fi as a service platform.
Gross margin remained strong for the 2nd quarter with 30.1% reported, a 9 40 basis point improvement compared to 20.7% in the Q2 of last year and generally in line with margins in the low 30s in the most recent previous quarters. That year over year improvement was primarily driven by our shift of manufacturing out of China and into Vietnam to escape the burden of tariffs and material reduction in the use of airfreight. While gross margins continue to be positively impacted by an increasing proportion of revenues from software and our bundled solutions as well as prudent management of our cost of goods sold, we did explain some modest increase in component costs. In addition, we made the proactive decision to utilize airfreight on certain shipments in order to optimize inventory ahead of Prime Day in June, a strategy that was successful considering this year's Prime Day netted $873,000 which was more than the previous 4 Prime Day events combined. Over the long term, as we continue to execute our software driven product strategy, employ limited use of airfreight and to continuous improvements in operational efficiency, we expect our gross margins to expand and eventually normalize at a rate versus where we are today.
Please turn to Slide 14 for additional discussion about our revenue. Beginning in the Q1, we introduced revenue bookings, a key performance indicator that provides additional insight into the drivers of our revenue. It is a non GAAP metric that is a composite of our total recognized revenue plus the changes in deferred revenue in that period. We believe this is an important metric that can help investors understand our business better as we grow and shift our sales mix to include a larger portion of software subscription versus hardware only sales. Total revenue bookings for the Q2 were $15,600,000 which includes the $14,900,000 in recognized revenue that I mentioned earlier and a net increase in our deferred revenue balance of $700,000 the net increase in deferred revenue in the Q2 of 2021 was the accounting result of software service sales that will be recognized as revenue ratably over the next 36 months, less revenue recognized for prior period sales, in this case, sales in the Q1 of 2021.
Our ratio of total deferred revenue to recognized revenue for the 2nd quarter was 7% compared to only 2% in the Q1 of 2021. We expect this ratio to continue to grow as software subscription sales increase both from existing products and as we introduce new intelligent hardware products. Turning now to Slide 15 for a look at our profitability metrics. For the Q2 of 2021, our operating loss was $1,600,000 which is in line with an operating loss of $1,500,000 in the Q2 of 2020. Please note that the non rounded increase in net loss year over year was only $24,000 Also important to note, the net loss recorded in the Q2 2021 was impacted by non recurring and one time inventory scrap expense, which marked completion of a warehouse organization and optimization project in the amount of $500,000 Sequentially, this compared to an operating loss $536,000 which is inclusive of $116,000 of non recurring merger related expenses in the Q1 of 2021.
Driving this improvement was our ability to effectively manage our expenses and accruals as well as the success we saw in the quarter with selling intelligent hardware products, driving the related increase in deferred revenue. We are delivering meaningful improvements in our operating results across the board with both accelerating top growth and material improvements in our operating efficiencies. Below the line, interest and other income and expenses were $78,000 resulting in a net loss of 1.6 dollars or minus $0.04 per basic and diluted share for the Q2 of 2021, which is in line with the net loss of $1,500,000 we reported negative $0.04 per basic and diluted share in the Q2 of 2020. These results compare slightly unfavorably to the prior quarter when we reported a net loss of $500,000 or minus $0.02 per share for the Q1 of 2021. On a quarter over quarter basis, Q2 2021 adjusted EBITDA was negative $300,000 which represents an unfavorable change of negative $600,000 versus the positive $300,000 recorded in Q1.
I would like to note that the Q2 result was impacted by a $500,000 one material scrap expense that again mark the completion of warehouse organization and optimization projects. The continued steady progress our operating results were driven across the board by assertive marketing of our products, improved execution and diligent management of costs, including effective supply chain management, the strategic use of airfreight and also tariff avoidance. We will continue these efforts as we progress through the second half of the year with a focus towards achieving EBITDA profitability during Turning now to Slide 16 for a look at our balance sheet. At the end of the second quarter, we had cash and cash equivalents of $1,600,000 an increase of $400,000 compared to the $1,200,000 as of the prior period end. Our Q2 ending cash balance includes $750,000 in restricted cash related to prior period issuance of performance bonds for the payment of tariffs.
Tariffs are fully paid and invoiced in these performance bonds have started being released beginning in the second quarter. The increase in cash compared to the prior quarter was due to effective expense management, while we were able to continue investing in employees, both ahead of growth and as a risk mitigation factor to hedge against chipset shortages. Accounts receivable on a net basis the 2nd quarter at $9,300,000 representing a $600,000 increase compared to the prior quarter and is the direct result of our strong sales performance. Inventories were $19,600,000 at the end of the 2nd quarter, representing an increase of $1,600,000 compared to the prior quarter end due to our investment in inventory to meet both projected demand and to hedge against industry wide chipset shortages that continue to persist. As of June 30, 2021, we had outstanding debt of $7,300,000 which was comprised of $60,000 related to a PPP loan and $7,200,000 drawn on the company's $13,000,000 line of credit.
The company had an additional $2,800,000 worth of availability on that credit facility at quarter end, this compares with $7,000,000 in outstanding debt as of March 31, 2021, which was comprised of $60,000 related to PPP loan and $6,900,000 drawn
on the company's credit line.
As a subsequent event at the quarter end, I am happy to report that we raised approximately 22 point $7,000,000 in net proceeds from a fully marketed secondary public offering of our common stock. Completion of this offering provides us with additional financial flexibility and sufficient capital to support our strategic growth initiatives. Additionally, as Greg mentioned, having completed our official name change to minimum in June, we executed a disposition of doom related trademarks assets for the sale that netted the company $4,000,000 of cash. Our Q2 financial results reflect the momentum we are building and reinforce our enthusiasm for the plans we have for continued improvement. With that, I'd like to pass it back to Greg for closing.
Thanks, Sean. Turning to Slide 17, I'd like to close with a summary of how our Q2 reflects solid execution of our strategy to build value for customers and shareholders. With a new management team, we're rapidly growing e commerce channels and performance, capping our Motorola partnership as a differentiator A new market entry accelerant, achieving margin expansion through higher ASP products driven by powerful software I'm leveraging the latest technologies to address the rising need for a connected home that's safe and supportive for life and work. And with that, thank you everyone for joining us this morning. Operator, we're now open for questions.
Your first question comes from the line of Josh Nichols.
Yes. Hi. Thanks for taking my question and good to see some strong operating performance out of what is typically a seasonally slower period.
You kind
of hit on it briefly, but you have a couple of significant tailwinds coming on in the second half with like India and some new product launches. William provided specific guidance. Is it fair to assume that you should see a significant step up in sales as we move Into the stronger second half and what are the opportunities to kind of increase the gross margin level from the current levels?
Yes. Hey, good morning. Thanks, Josh. Yes, I would say that for the year, we continue to see that strong growth rate, especially in Q4, we will really get the benefit of the products and more of the benefit of the products coming to the market. That's going to be a real tailwind for us.
And then I think you said the second part of your question was a gross margin question. Maybe I'll ask Sean for you to weigh in on those as we look to those. The exciting places are higher ASP products, computer software, which has No concrete gross margin implications. But Sean, do you want to speak to those? And I'd also welcome Nicole to comment on that.
She does think a lot about gross margin and And driving ASP in terms of our strategy. So I'll welcome your comment on that too as well, Nicole. Sure.
Yes, again, thanks for the question, Josh, and thanks for listening in. I would just kind of double tap on what Ray just said. With the new product introductions that we have slated to the And all about coming to market with the software built in. We do expect higher ASPs. Those are higher margin products.
We do expect to get some uplift in our gross margins with those introductions.
Nicole, just maybe do you want to expand on that a little bit about Some of the things we're thinking about doing on those products. You can even go into some of the ideas we have around bringing incremental software value to the market via No additional MRR for security or data management.
Sure.
So we are launching 3 new products in our Wi Fi 6 family, the Motorola AX1800 Mesh, which is our first Wi Fi 6 Mesh System, we'll be rolling out 1 pack, 2 packs and 3 packs for expandable mesh. And this is definitely the highest price point mesh product to date, and we are launching in online retailers. We're also rolling out 2 modem routers, the Motorola MG8725 and the Motorola MT8733, these have very strong powerful routers built inside and they're both extremely high speed products. We like to call them the Rolls Royce of our product line. And these are rolling out at $369.99 $37,999 which is Definitely our highest ASP modem routers to date.
And we see a blended hardware software margin of over 50%, which will be a nice it's our highest gross margin products to date as well.
Thanks for elaborating on that, some of the product releases coming up. And then just to kind of hit on it, again, since you mentioned it, Very strong deferred revenue growth quarter over quarter here. Now you're $1,000,000 right, of deferred revenue. What's the expectation for how quickly that could ramp? And if you could help or maybe talk about 1 or 2 of the larger opportunities that could accelerate that trajectory as Next 12 months or so
to further manage software sales.
Yes. I think I would say just to start off, maybe I'll take it to Sean So if you guys have any commentary on any perspectives of growth on that line. But it's really about getting more of our products With that software on it, right, today, we're very excited about the products we have with the software on it. But we have, I think, 20 products to market and only a limited number of those have a software on it. So when Nicole talks about those 3 products and as we talk about Every new product we're working within the market is going to have software on it.
As those kind of come in, we expect to see continued strong growth In that deferred revenue number as a percentage of total bookings, which we track internally as a metric. Sean, do you have any other comments on that on
Yes. I would agree with what you just said, Greg. So with continued expected strong sales The MG-eight thousand seven hundred and two, which is the new product we launched in Q1, that's really been a main driver of deferred revenue to date. I expect to see deferred revenue continuing to become a more material piece of our balance sheet. And then again, in Q4 and with Every new product launch going forward that comes together as an intelligent hardware software product, I'd just I expect as each new product comes online and we start making sales to see a step function in deferred revenue.
Thanks. And then last question for me. Good to see the company is expanding out of North America. I know very Early stage about selling into India. But if you could kind of provide us a little bit of some insight, obviously, a different market than what you're dealing with today In terms of ASPs and margin, could you elaborate on that a little bit, please?
Yes. So I'll Speak to this and then happy to have again, happy to have Sean, you were in a cold weigh in on this one.
Sean, you know It's open.
Okay, great. Yes, well, if you want to you did spend a fair bit of time thinking about this, especially because we launched Amazon, Nicole, if you want to get the first direct response.
Sure. So, we're kicking off with India, per our announcement today in Amazon and Flipkart. Amazon is our highest margin sales channel. So that is a huge benefit for us in our global footprint. We will be charging about the same for the products that we are launching at the moment in India.
These will represent high sort of more premium products than you see on the market. We are looking in our product roadmap to find some lower ASP or trying to create some lower ASP products as far as the hardware is concerned so that we can get our software out to as many homes as possible. And that will be our strategy for ongoing emerging markets, which include South America and some other countries nearing India. We will be looking to build some lower ASP products. Interestingly, our software is able to work on lower ASP products, and that is actually a unique differentiator for us in the market.
Most other software platforms have really high requirements of the hardware itself. So this is why it's important that we take our 1st mover advantage and bring our software to market in emerging markets, Even if it means lower ASP hardware in order to get our software distributed. And then we will also be tackling mid market and mature markets in Europe, and these will be a matter of bringing our Wi Fi 6 products in today's countries using primarily Amazon.
Thanks. I'll pass the baton to the next question.
Your next question comes from the line of Tim Sivago, please go ahead.
Hello Good morning. I had a couple of questions.
First is kind of
a little high level on end market dynamics. And To what extent you see the following factors is kind of key in driving growth from a market perspective? And those would be additions of new broadband Internet subscribers by cable and other ISPs, Which obviously have been strong for the pandemic, but kind of normalizing a bit. Upgrades in Connection speed and capability on the part of consumers and maybe probably associated with that just upgrades in overall Wi Fi capability Regardless of speed tiers, as you look at
those three factors, which do
you see driving your business and I know you mentioned kind of growing ahead of the market and TAM estimate is based on a pretty big TAM, but how fast do you think your Your markets are growing right now.
So I guess I'll
say and just to make sure I track you, you talked about growth gain given by new subscribers, upgrades and connection speeds and then just general upgrades in Wi Fi connections, so those are 2 things you mentioned.
Yes. And feel free to add to that. I felt like this could be some pretty important factors in determining
The overall growth for ECPE, sorry.
Yes. I would say that. I mean,
I think when I think about Which of those will ultimately lead to greater growth for the company, especially as we consider outside the I think it's really about that technology lifecycle upgrade and about the combination of increased speed and increased needs. So I think the only one that you didn't mention there was The increase in what people bring from home and how that's just going to be consistent and persistent, right? I think as people enter into this, let's say, the 2nd year and maybe we'll end up with people learning from home this fall in a way they don't expect, It's just going to become a we know that Internet is a utility, but good Internet that can support multiple people doing very important life tasks, earning and learning from home just becomes kind of an unavoidable reality. And as people settle into those patterns, they start to just accept more. And I think that that's going to drive people to more on faster speeds, bigger types and all that's going to The down to our benefit.
I do think that nuisance drivers is important for us, but I also would say we have so much room to grow, especially as we bring Using Wi Fi products to market that in the U. S, I think that we have a lot of room to grow even if subscribers growth slows. And then once we get to the international markets and we're just such a tiny such a limited market penetration at the moment that we have, from my perspective, massive just massive amounts to grow, and it's really driven by our execution in getting products to market. The need is there. We have the brand.
We have software that makes our products sticky. And we're just at the outset of actually Creating those daily relationships, weekly relationships with customers with the software that we have. So I think those are all those are the trends you mentioned are correct, But then also the live, earn, learn trends that are going to persist. And I think become just The fact that I've changed the way that people interact with the network, which is going to drive both all 3 of those at a more fundamental level.
Yes. Let me just double tap on that. So at a high level, the upgrades is really a matter of in a mature markets, the product upgrades are very prevalent and the main driver for business. In an emerging market, actually just the availability of products in retail is the driving factor. Many, for example, in India, purchasing a router through retail channel is actually quite a new concept as opposed to purchasing it through your ISP, and so we are going to be grabbing that tailwind.
So it really depends on the markets you're looking at. And then when you look at the our drivers of growth, domestically, we're only about 8 percent penetrated in retail. So that represents a ton of headroom for us to go after. And then internationally, a nice tailwind is our ability to take advantage of the Amazon Marketplace, as Gray mentioned in our overview. So those are our 2 sort of micro drivers internally and then macro is really about upgrades, the availability of high speed for the first time and also the availability of products in the retail environment.
Great. Thanks. And my follow-up was kind of more on the ISP side, where you've mentioned we have over 100 providers that you're working with. And to what extent those providers are you're biased toward smaller type or even rural providers. And I guess I asked this in the context of both the recent infrastructure bill as well as the R and D, I know you mentioned Connect America in your presentation.
There's obviously a lot going on in terms of government rural broadband subsidies across a range of Technologies, fiber, wireless cable, whether you're starting to see an impact From that activity and what sort of opportunity you could see for the company upcoming?
Yes. I mean, I would say we have some impact. Certainly, our customers are getting benefiting from that from those investments, and we're excited to be there to We certainly do that customer base is biased towards Challenger ISPs. We're very excited to be at that show with the Whisper America show coming up here pretty shortly when we're going to be launching that Connect America Fund compliance Speedtest compliance feature. I think that is we're very excited about it.
They're benefiting from it, and we're seeing them starting to we make the commitments and we're excited to see more of that investment coming around. I think everyone kind of goes to my point earlier about Everyone's live and learn in the morning at home. It's simple. Oftentimes, you'd rather go without power than without Internet. Having that broad having better speeds, reach more Americans is great for us.
It's great for the economy. It's great for both the consumers and the ISP customers we have. I also think an interesting thing for us is we did sign an MOU with Facebook, we do partner with Microsoft on their initiatives to we connect a much, much broader swath of the globe. So we see not only supporting kind of Challenger ISPs, upstream ISPs in the U. S, but we see it as part of our mission to work with people globally, right, to bring more individuals online, More connected home safe and supportive for that can work.
So and that's getting a lot of attention. Facebook has Obviously, a great incentive to get more people online using their Facebook accounts from home and doing all the other things that they expect to deliver That are going to be made more sense kind of in a home network architecture as opposed to mobile architecture. So we're excited to be partnering with PAMA with Microsoft To bring the next 1,000,000,000 homes online and be the software that's there. Nicole mentioned that not only are we well designed to work On mineral hardware, but also on microchip hardware in the U. S.
And around the world and third party hardware. We're working to bring low ASP hardware and having software that will work there so that we can get Those companies use their software, build that relationship with them and generate continued value For those consumers and for the IFPs to serve them. Nicole, I don't know if you do have any other comments you want to add to my perspective on that?
Sure. So the competition is great for us. Competition amongst ISPs in the U. S. And that is certainly being fueled by government funding.
It's building out the ISPs are the smaller ISPs are getting the funding to build out fiber to the home, which is great for us, particularly because of our CAF suite that's coming up. But just in general, our solution is turnkey for smaller ISPs and really we give them a lot of benefits, including the ability to choose their own hardware, the ability to pay as they grow. So the pricing model really works out for them, and we continue to value pack that offering. So competition is great for us, And we see it every day in the inbound inquiries we get. In marketing, we just ran an inbound campaign On competing with Starlink, so SpaceX Starlink is rolling out coverage areas and that has a lot of incumbent local ISPs questioning, how do I compete against SpaceX?
And so we did a deep dive and put out a white paper and got it has been our most popular marketing campaign endeavor yet. So it just goes to show that the competition is really heating up, which really drives consumer choice and it makes consumers smarter. They are looking for intelligent Wi Fi solutions. So it's a great time for us to be right there.
Great. Thanks very much.
Thank you. Your next question is from Keith Rose.
Guys, thanks for the update. I came in a little late, but I just want to Just some clarity on the balance sheet. You guys did this offering With Wiley in July and you reported a balance sheet at June 30. So on the pro form a, Can you give us a sense for how much cash the business is sitting on net cash and what's your liquidity profile looks like today? And then on that, I just also want to clarify.
Greg, you personally participated in that deal as well, right? Yes, I did. Yes, I bought 200,000 shares. And Sean, you just want to speak How much we added? How much between the 2 significant events post quarter were the net proceeds from the raise And then the mark that we got for the disposition of the trademark assets.
So what are the amounts to the balance sheet?
Sure, sure. So net proceeds from the offering, dollars 22,700,000 and then the disposition of the trademark Greg just mentioned is netting us another $4,000,000 So clearly, liquidity has been improved quite a bit since that sixthirty balance sheet that you were referring to. And I would say that we're targeting to have somewhere in the neighborhood of $22,000,000 or so $21,000,000 to $22,000,000 of cash on the book
Yes. Just to comment on kind of what we're doing with some of that cash. We were In the way, one of the reasons that we went out to market is I always believe there's a you can see reasons that if you see capital being a strength on your opportunities and it's the right time to speak to the capital markets. And we were not able to not withstanding the Expansion of the line with Silicon Valley Bank. We were not able to optimize Amazon inventory in Q1 or Q2.
In Q1, that cost us $1,000,000 in top line. In Q2, it cost us around $750,000 in top line. We're excited to put some of that capital to work alongside that operating capital facility we have
with the credit facility we
have at Silicon Valley Bank To allow us to really perform, right? We have customers that want to buy our product, and we want to make sure that, that product is on shelves. Yes. So that gives you some characteristics of it. Is that helpful?
It is. And then I just wanted to Say back to sort of understanding, your first half numbers were with your existing product line And with basically Best Buy and Amazon as your distribution channels, these retailers that you guys just highlighted bringing on, Lowe's, Home Depot, etcetera, were you not selling through those channels previously and now you will be selling through those channels?
Yes, let me just jump in there. So we have been in primarily Best Buy and Amazon make up the majority of our sales, but we also have been in retailers, including Target And Walmart, B&H Photo, Barnes and Noble and Staples, So quite a few. So the announcement that you just saw is representative of net new retailers, but we are also already at a bunch of retailers.
Okay. And then can you talk about penetration? What does that look like at those retailers? So you've been in Best Buy, what percentage of Best Buy are you in? Is that growing?
These other ones that you've highlighted, at what point do you are you sort of in all of them versus some of them?
Right. So there are actually a couple of 1,000 retailers in the U. S. And we're in about A handful, so up to 20, let's say. So we have 8% market share of all retailers according to NPD research data, so a lot of headroom to grow there, both in our debt as well as
Sorry, Nicole, I meant penetration in the existing retailers. Are you carried in all of the Best Buys? Are you carried in all of the Home Depots?
We are carried in all of the Best Buys in store. We are in Home Depot online. So we have the opportunity to get into store for several retailers that were not already in store. That would include, for example, Walmart. And so for Best Buy to give you an idea where the 3rd as far as market share goes, I believe it's between 30% to Sorry, it's up to 40% in sales.
We had a really, really good June, for example, where we sold about 40% of all of the sales in our categories, but usually it's more to the tune of between 20% 30%. And that's just for Best Buy. So we are we typically end up number 3 to ARRIS and NETGEAR in retailers, and our sales footprint can range anywhere between 10% 30% in any given retailer.
Thank you. So that sounds like you've got a lot of tailwinds. Appreciate it.
Time, I would like to turn it back over to management for closing remarks.
Thanks everyone. Really appreciate your time this morning for the exciting news, especially during the latter part of August. Great to have you on the phone and look forward to joining you if any of you guys registered for the rest of the study conference coming up. And as always, keep an eye on ir. Minim.com for our calendar and more information about the company.
And always feel free to reach out to James. We love talking with all of our stakeholders, our future stakeholders and appreciate your time this morning. Thanks so much.
Thank you. This concludes today's conference call. You may now disconnect.